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After Your Examination

What to do if you’re found to be out of compliance or facing a penalty

The first letter that you receive generally does not state whether or not the examiner has recommended a penalty, but there is often wording about potential penalties. The letter also describes any deficiencies that the examiner has found. It is important to correct these as soon as you can. When FINTRAC finds the same deficiencies in a subsequent examination, they are more likely to recommend a penalty.

Keep a detailed record of the deficiencies, what you’ve done to correct them, and when. This can be done in a simple chart in Word or Excel, like the one below.

FINTRAC Finding Actions Taken Date Completed
Staff training: records of all staff training must be maintained. Implemented a staff training log maintained by the Compliance Officer that describes the training, who was trained and when. January 23, 2013
Compliance Effectiveness Review: A review must be completed at least every two years. Implemented a Compliance Officer task log that includes the timing of reviews and program updates. January 20, 2013
Requested price quotes from three external consultants for review services. January 20, 2013
Signed an agreement to complete a review of March 2013 February 6, 2013
Worked with the external consultant to complete the Compliance Effectiveness Review March 29, 2013
Management sign-off on the final report April 12, 2013

In the face of a penalty, your only true defense is due diligence. This defense involves providing evidence that you have actually met your obligations (done your due diligence). You must be able to demonstrate that this is the case through your documentation. It’s not enough to have done something; you need good records (either paper or electronic).

Penalties will be adjusted based on the size of your business (based on the number of full time equivalent employees) and your past compliance history. There are three options when you are dealing with a penalty.

  1. You can choose to pay a penalty immediately. In this case, your company’s name, the penalty and the nature of the deficiencies will be published on FINTRAC’s website. The benefit of this strategy is that you are spending only the time and energy that it will take to pay the penalty and remediate the deficiencies. There is, however, the possibility that other relationships will be affected such as your banking and supplier relationships if a penalty is published.
  2. If you do not wish to pay the penalty and believe that you have done your due diligence (before the exam) for some or all of the deficiencies, you can appeal to FINTRAC’s director. This must be done relatively quickly after you receive the notice of penalty. This approach will require you to provide both evidence and explanations for the deficiencies that you are disputing. Your appeal should be clear and well organized. It can be helpful to work with an external consultant and/or lawyer who is experienced in this type of appeal. If you are considering an appeal to the director, remember that it’s better to bring in outside help as early on in this process as you can if you know that you will need assistance.
  3. If your appeal to the director is not successful, you may launch an appeal in federal court. This process can be lengthy and expensive. Unless you are a lawyer, you will need the assistance of an experienced lawyer to navigate the process. If you are considering a federal appeal, Outlier can recommend lawyers that we work with who have successfully navigated federal appeals. Similar to appeals to the director, if you know that you will need assistance, it’s best to shop around for the right team and make hiring decisions as early on in the process as you can. Even the most seasoned professionals may miss things under time constraints. Some won’t even consider taking on a case “at the last minute.”

Dealing with examination findings and penalties can be emotional. There is a great risk for you and your business. Throughout the process, it’s important to stay calm and keep a level head. It’s helpful when you can provide detailed explanations of your business model. Remember that you know your business well, but others don’t have the same knowledge.

You will need to consider what’s best for your business in the long term. While there are advantages to appealing penalties, there is no guarantee that your appeals will be successful. There are also costs and the time that you spend working on the appeal is time away from your normal business. If you are in the process of making these decisions, please feel free to contact us. We can walk through the process with you and propose possible solutions. There is no cost unless you enter into a formal agreement with us to provide services.

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